Defense Industry Association calls on the Verkhovna Rada to return Defence City bills for revision

The association believes that the current model for selecting residents will work selectively and will not cover a significant part of effective and critically important defense industry manufacturers, which will create unequal conditions in the market, writes UNN.

DetailsNAUDI indicates that restrictive criteria for access to the Defence City regime will not allow even those enterprises whose activities are 100% aimed at meeting the needs of the Defense Forces and which are already recognized as strategic to become residents.

“Only when enterprises recognized as critically important in the defense industry enter the Defence City regime will it be possible to implement the task of the Supreme Commander-in-Chief – to significantly increase our own, national production,” states the NAUDI statement.

Companies that remain outside the list will operate without tax incentives and with higher costs, which, according to the association, will harm the development of the entire industry.

The defense association calls for using the procedure for returning documents for revision in accordance with the Rules of Procedure of the Verkhovna Rada.

RecallOn July 16, the Verkhovna Rada of Ukraine adopted in the first reading three key draft laws aimed at introducing a special legal regime, Defence City, to support the domestic defense-industrial complex. The documents provide for tax, customs, and budget benefits for participants of the special regime until 2036.

At the same time, the aviation industry sounded the alarm due to the disregard of its position when forming the Defence City regime, as well as due to overly strict criteria for residents, which even such aviation flagships as “Antonov” and “Motor Sich” would not be able to meet.

According to MP Nina Yuzhanina, the inclusion of major aviation companies in the special regime is considered unequivocally necessary. In turn, MP Mykhailo Tsymbalyuk, commenting on aviation in Defence City, stated that state support is important for enterprises of all forms of ownership, because it is in synergy that they are able to restore Ukraine’s power in aircraft manufacturing.

AddUNN obtained a list of amendments to one of the draft laws on the creation of Defence City, submitted by people’s deputies for the second reading. It is proposed to expand the list of residents by including aircraft manufacturing enterprises that fall under the Law “On the Development of the Aircraft Manufacturing Industry.” This will allow officially including aviation enterprises, defined by the Cabinet of Ministers as critically important for the economy and defense, in Defence City.

Regarding the threshold for income from defense activities, it is proposed to reduce the requirement to 40-50%, take into account annual, not just quarterly income, and include in defense income the production and maintenance of aircraft, engines, and components. Without this, even giants like SE “Antonov” risk being left out of the special regime and losing tax benefits. It is also proposed to include in Defence City enterprises that participate in international contracts for the export of military or dual-use technologies.

In addition, it is about abolishing restrictions on the presence of tax debt, overdue contracts or dividend payments, as in wartime conditions this does not always indicate unreliability. Activities are affected by shelling, relocation and supply disruptions. Instead, it is proposed to allow the inclusion of such enterprises in Defence City provided the debt is repaid within three years.

Other amendments provide for the expansion of tax benefits for aircraft manufacturing (provided reinvestment), customs preferences for critically important imports, state guarantees and insurance of export contracts. The conditions for returning benefits in case of loss of compliance with the criteria are also clarified, in particular, the prohibition of retrospective sanctions. The released funds should be directed to production development, modernization, research and development work, implementation of new technologies, personnel training and acquisition of intellectual property rights in the field of aircraft manufacturing.

Whether the parliament will take into account the submitted amendments regarding the aviation sector remains to be seen. At the same time, delay or disregard for the needs of the industry can have critical consequences: from the inability to ensure the technical serviceability of the Ukrainian Armed Forces’ aviation to the final decline of Ukrainian aircraft manufacturing and the outflow of qualified personnel.